Ireland’s latest sell-off: Forest harvesting

By Jamie Smyth | Financial Times,

DUBLIN — The hikers set off under a canopy of Sitka spruce, Japanese larch and Scots pine trees on a cold winter’s morning. Mountain bikers are already traversing the muddy paths at Ticknock — a forest just outside Dublin.

But away from the outdoor fun, a dark cloud is looming over Ireland’s forests. Under the terms of its 67.5 billion euro international bailout, the government is being forced to sell off assets and has decided to sell harvesting rights to timber as a way of raising cash.

Karl Boyle, chief executive of Mountaineering Ireland, the organization for walkers and climbers, worries that the sell-off could prevent Dubliners from enjoying the area’s natural beauty. “This would restrict access to forests and higher uplands,” he says.

Boyle is part of a disparate coalition of sports enthusiasts, trade unionists and timber mill owners opposing Dublin’s decisfion to raise 400 million to 600 million euros by selling harvesting rights to forests for up to 80 years.

The sale is likely to be pitched at institutional investors such as pension funds, which seek a stable investment over the longer term.

Dublin has agreed to the sales with the troika of international lenders, which insists half of the money raised will be used to pay down debts. But progress is slow and opposition to state sell-offs is growing as Ireland prepares to exit its bailout program later this year.

The government has already reneged on a pledge to sell a 15 percent stake in state electricity company ESB following trade union pressure. It now faces a “Don’t Loot The Lottery” campaign to block the sale of a lottery license worth up to 400 million euros, as well as opposition to its forestry strategy.

Coillte, Ireland’s state forestry company, owns 445,000 acres of forest, equivalent to 7 percent of Ireland’s land cover. Under the government’s plan the company would be restructured and the rights to harvest forest timber would be sold. Ownership of the land would be retained by the state to ensure public access to the forests.

But campaigners warn that forcing investors to provide access to forests would be costly for companies and could be ineffective. Companies have little incentive to maintain rights of way, particularly given Ireland’s stringent property laws, which unlike Britain do not give the public a “right to roam” on private land. A meeting between campaigners and parliamentarians is scheduled for Tuesday.

“Forestry can be a very emotional issue,” says Charlie Daniel from RMK Timberland Group, one of the international investors contacted by Dublin about its planned sale. “But public access has not been a problem in our experience as terms can be included in leases.”

Many companies in Ireland’s forestry sector, which employs 12,000 people and is worth 2.2 billion euros a year, oppose the sale. Sawmill owners fear that the break-up of Coillte, which supplies 80 percent of the logs to their mills, would leave them at the mercy of foreign investors.

“The Irish sawmilling industry could be wiped out within a matter of months if the purchasers decide to withhold supply or export our logs to other European countries or to China,” says Patrick Murray of Murray Timber Group, one of Ireland’s biggest sawmill operators.

A report commissioned by Coillte trade unions claims that restructuring and transforming the state-owned company into a national parks service could cost the state 1.3 billion euros. Unpredictable timber prices, it says, mean that selling harvesting rights “cannot be justified.”

The architects of the government strategy, however, point to the success of harvesting projects in New Zealand and Australia.

“Half of Europe’s forests are in private hands yet access is not a problem. Irish sawmills would also be able to bid for timber harvested in Ireland,” says Alan Matthews, an economist who recommended selling harvesting rights in a state-commissioned report.

He notes Coillte has already sold harvesting rights to pension funds and land over recent years.

“As always in Ireland there are people opposed to change, particularly the trade unions,” says Colm McCarthy, an economist at University College Dublin. “It is up the government to make the case for its policy.”